<p class=“MsoNormal“>We finally got past the <a target=“_blank“ href=“https://www.forexlive.com/centralbank/federal-reserve-hikes-50-basis-points-as-expected-20221214/“ target=“_blank“ rel=“follow“>FOMC
Policy Decision</a> and saw some weakness in the market creeping in
afterwards. The overall event was more hawkish than expected on two fronts. The
<a target=“_blank“ href=“https://www.forexlive.com/centralbank/fomc-dot-plot-and-central-tendencies-from-dec-2022-meeting-eoy-2023-48-20221214/“ target=“_blank“ rel=“follow“>Dot
Plot</a>, showing the peak rate, was revised to 5.1%, which is a bit higher than
the market expectations at the time of the event but more or less in line with
peak rate expectations in the past weeks/months. </p><p class=“MsoNormal“>The more hawkish stuff here is
that the majority of members saw rates peak at or above the 5% level, which
shows an unanimity among members, and the rate is expected to be cut to 4.1% in
2024, which is higher than previously indicated and shows a willing to stay
“higher for longer”. </p><p class=“MsoNormal“>The second more hawkish part came
from the <a target=“_blank“ href=“https://www.forexlive.com/centralbank/powell-opening-statement-we-have-more-work-to-do-20221214/“ target=“_blank“ rel=“follow“>Fed
Chair Powell press conference</a> where he pushed back against
bets that the Fed would reverse course next year and that they will “stay the
course until the job is done” to avoid the mistakes of the 1970s when the Fed
prematurely eased monetary policy and had to fight with repeated inflationary waves.
</p><p class=“MsoNormal“>The Fed also keeps on repeating
that the <a target=“_blank“ href=“https://www.forexlive.com/news/us-november-non-farm-payrolls-263k-vs-200k-expected-20221202/“ target=“_blank“ rel=“follow“>labour
market</a> is extremely tight. They probably won’t have conviction in lowering
interest rates until they see unemployment to pick up. Even though inflation
data may continue on showing relief, the Fed clearly wants to see the labour
market to show weakness as well. </p><p class=“MsoNormal“>To achieve this, they need a
proper recession and that’s what the bond market may be seeing. For the stock
market, on the other hand, it’s not good news as a possible overtightening from
the Fed and a serious recession are two of the worst scenarios. </p><p class=“MsoNormal“>DOW JONES Technical Analysis</p><p class=“MsoCaption“>Recent two weeks of price action and catalysts on the Dow
Jones on tradingview.com</p><p class=“MsoNormal“>On the technical side as you can
see in the chart above, the price has been chopping around for the last 2 weeks
as tier one economic data increased the fear of a possible surprise in the <a target=“_blank“ href=“https://www.forexlive.com/news/us-november-cpi-71-yy-vs-73-expected-20221213/“ target=“_blank“ rel=“follow“>CPI
report</a>, which in the end missed expectations. The market erred anyway on the
defensive side going into the FOMC meeting and got served a more hawkish than expected
event. The price now is compressed between an upward trendline and a strong
resistance.</p><p class=“MsoNormal“>Looking at the daily chart below
we can see that the 35192-35412 blue zone is a pretty strong resistance. The
price couldn’t break that area and got immediately rejected after the spike
from the CPI report. We can also see that there’s a <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-understanding-divergence-20220429/“ target=“_blank“ rel=“follow“>bearish
divergence</a> between the price and the <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-understanding-relative-strength-index-rsi-20220426/“ target=“_blank“ rel=“follow“>RSI</a>. This signals a weakening
momentum right at the resistance, which points more to the downside than the
upside. Will this FOMC event mark the top in the Dow Jones? </p><p class=“MsoCaption“>Daily chart of the Dow Jones on tradingview.com</p><p class=“MsoNormal“>We will see. As of now, the
levels to watch are the blue zone <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>resistance</a> and the blue upward <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-trendlines-20220406/“ target=“_blank“ rel=“follow“>trendline</a>. If the price breaks up, we may
see the Dow Jones climb to the all-time-high at the 36832 level. If the price
breaks down, we should see the price reaching the first target at 31761 and a
further break below may lead to the low at 28660.</p>
Policy Decision</a> and saw some weakness in the market creeping in
afterwards. The overall event was more hawkish than expected on two fronts. The
<a target=“_blank“ href=“https://www.forexlive.com/centralbank/fomc-dot-plot-and-central-tendencies-from-dec-2022-meeting-eoy-2023-48-20221214/“ target=“_blank“ rel=“follow“>Dot
Plot</a>, showing the peak rate, was revised to 5.1%, which is a bit higher than
the market expectations at the time of the event but more or less in line with
peak rate expectations in the past weeks/months. </p><p class=“MsoNormal“>The more hawkish stuff here is
that the majority of members saw rates peak at or above the 5% level, which
shows an unanimity among members, and the rate is expected to be cut to 4.1% in
2024, which is higher than previously indicated and shows a willing to stay
“higher for longer”. </p><p class=“MsoNormal“>The second more hawkish part came
from the <a target=“_blank“ href=“https://www.forexlive.com/centralbank/powell-opening-statement-we-have-more-work-to-do-20221214/“ target=“_blank“ rel=“follow“>Fed
Chair Powell press conference</a> where he pushed back against
bets that the Fed would reverse course next year and that they will “stay the
course until the job is done” to avoid the mistakes of the 1970s when the Fed
prematurely eased monetary policy and had to fight with repeated inflationary waves.
</p><p class=“MsoNormal“>The Fed also keeps on repeating
that the <a target=“_blank“ href=“https://www.forexlive.com/news/us-november-non-farm-payrolls-263k-vs-200k-expected-20221202/“ target=“_blank“ rel=“follow“>labour
market</a> is extremely tight. They probably won’t have conviction in lowering
interest rates until they see unemployment to pick up. Even though inflation
data may continue on showing relief, the Fed clearly wants to see the labour
market to show weakness as well. </p><p class=“MsoNormal“>To achieve this, they need a
proper recession and that’s what the bond market may be seeing. For the stock
market, on the other hand, it’s not good news as a possible overtightening from
the Fed and a serious recession are two of the worst scenarios. </p><p class=“MsoNormal“>DOW JONES Technical Analysis</p><p class=“MsoCaption“>Recent two weeks of price action and catalysts on the Dow
Jones on tradingview.com</p><p class=“MsoNormal“>On the technical side as you can
see in the chart above, the price has been chopping around for the last 2 weeks
as tier one economic data increased the fear of a possible surprise in the <a target=“_blank“ href=“https://www.forexlive.com/news/us-november-cpi-71-yy-vs-73-expected-20221213/“ target=“_blank“ rel=“follow“>CPI
report</a>, which in the end missed expectations. The market erred anyway on the
defensive side going into the FOMC meeting and got served a more hawkish than expected
event. The price now is compressed between an upward trendline and a strong
resistance.</p><p class=“MsoNormal“>Looking at the daily chart below
we can see that the 35192-35412 blue zone is a pretty strong resistance. The
price couldn’t break that area and got immediately rejected after the spike
from the CPI report. We can also see that there’s a <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-understanding-divergence-20220429/“ target=“_blank“ rel=“follow“>bearish
divergence</a> between the price and the <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-understanding-relative-strength-index-rsi-20220426/“ target=“_blank“ rel=“follow“>RSI</a>. This signals a weakening
momentum right at the resistance, which points more to the downside than the
upside. Will this FOMC event mark the top in the Dow Jones? </p><p class=“MsoCaption“>Daily chart of the Dow Jones on tradingview.com</p><p class=“MsoNormal“>We will see. As of now, the
levels to watch are the blue zone <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>resistance</a> and the blue upward <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-trendlines-20220406/“ target=“_blank“ rel=“follow“>trendline</a>. If the price breaks up, we may
see the Dow Jones climb to the all-time-high at the 36832 level. If the price
breaks down, we should see the price reaching the first target at 31761 and a
further break below may lead to the low at 28660.</p>
This article was written by ForexLive at www.forexlive.com.